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To: Karl Drobnic who wrote (8531)	1/7/1998 2:24:00 PM
From: Jack Zahran	Respond to of 31646

Nice info Karl. I also wonder if TPRO Y2K sales for the 2nd Quarter are mainly services sales or if a significant Tool sales revenue came in yet. The Y2K tool sales are even higher margin.

To: Karl Drobnic who wrote (8531)	1/7/1998 2:26:00 PM
From: Andrew H	Respond to of 31646

>>The CFO's statement yesterday threw cold water on our hopes for big revenue increases, though it would still be a 40% increase over last year's 2Q.<< Again, I would appreciate someone else confirming the posted details of my conversation with Doug. >> So Step 2 is to reflect on the Revenue Mix. That will show in profit margin. Hardware sales generate big revenues, but profit margins are 7% to 10%. Consulting services generate smaller revenues, but profit margins are 42% to 70%. If revenues are flat, but the mix changes substantially in the direction of consulting services, we are on track. Adding 30 engineers indicates to me that the mix is rapidly changing to consulting services. << Excellent point. In fact Doug went out of his way in some detail to explain this to me. He did use the 7-10% figure you use in regard to sales of "materials." He also said that consulting margins were closer to the 70% figure. While he did not comment specifically on the mix for this quarter, he may well have been hinting that as you say, "the mix is rapidly changing to consulting services."